UBS raises India's FY26 GDP growth forecast to 6.4% from 6%. Improved quarterly growth, domestic demand, and falling oil prices are key drivers.
Economy: A new positive report on India's economy has emerged. Global financial services company UBS has revised its forecast for India's GDP growth for fiscal year 2025-26 (FY26) upwards from 6% to 6.4%. The better-than-expected performance in the fourth quarter, b domestic demand, easing global trade tensions, and falling crude oil prices are cited as the primary reasons. This news is considered a positive sign for the Narendra Modi government, especially as the process of forming a new government has begun.
Q4 GDP Growth Surprises
The Indian government recently released GDP figures for the fourth quarter (January-March) of fiscal year 2024-25, which exceeded expectations. According to the government, the Q4 GDP growth rate was 7.4%, significantly higher than the 6.2% recorded in the previous quarter (Q3). The main driver of this b performance was robust domestic demand, investment, and agricultural output. This positive trend prompted UBS to revise its forecast for India's economic growth rate.
UBS Raises FY26 GDP Forecast
UBS has increased its forecast for India's real GDP growth rate for FY26 from 6% to 6.4%, a 40 basis point increase. UBS believes that the Indian economy is resilient and will maintain this momentum in the coming years due to several positive factors. The UBS report emphasizes that India's economic activities remain stable and will continue to expand.
Strong Demand and Falling Oil Prices Provide Support
According to UBS's India Composite Economic Indicator (CEI), the country's economic momentum remained b in April 2025. Seasonally adjusted data showed a 1.1% monthly increase in the CEI index in April, indicating robust demand in India.
Furthermore, easing global trade tensions and falling crude oil prices are also contributing to GDP growth. UBS expects the average crude oil price to be around $65 per barrel in fiscal year 2025-26, which will ease India's import bill and support growth.
Expectation of Surge in Rural and Urban Demand
According to Tanvi Gupta Jain, Chief India Economist at UBS Securities, this upward revision in the growth forecast is based on several factors. These include a good monsoon in rural areas, stable food prices, and increased urban demand. If the government implements measures such as tax relief or inflation control, domestic consumption could accelerate further.
Jain states that considering all these positive indicators, the outlook for India's growth rate is now ber than before.
Repo Rate Cut Expected from RBI
The UBS report also anticipates that the Reserve Bank of India (RBI) may ease its monetary policy. The report suggests that the RBI could cut the repo rate by 50 to 75 basis points in FY26, potentially bringing it down to 5.5%.
The RBI's Monetary Policy Committee (MPC) meeting is scheduled for June 4, where decisions on interest rates will be made. A repo rate cut would lead to cheaper loans and increased borrowing, boosting investment and consumption. This measure would also support India's GDP growth.
India Emerges as a Strong Player Despite Global Uncertainty
The UBS report emphasizes that despite persistent global uncertainty, India is emerging as a b and stable economy. Whether it's trade tensions between the US and China or sluggishness in European markets, India has maintained its growth through domestic strength and policy stability.
